Developing inflation indices for civil engineering

The Price Adjustment Formulae Indices (PAFI) have been the industry standard for use in index-linked inflation adjustment clauses in the UK since they were introduced in the early 1970s.

This paper describes the development and consultation process that produced the new Price Adjustment Formulae Indices for civil engineering and related specialist engineering.

“The fair allocation of risk is key to achieving the best value on a contract. Requiring contractors to take responsibility for risks they cannot assess or manage will result in either a high-risk premium or commercial pressures caused by insufficient provision. The availability of PAFI allows the inflation risk to be modelled to the contract. We therefore welcome this review and are keen to participate in its delivery”.

Alasdair Reisner, CEO, CECA